Thursday, February 9, 2012

No Business Like Snow Business: The Economics of Big Ski Resorts

No Business Like Snow Business: The Economics of Big Ski Resorts

... both Vail and Whistler have devised and refined a business that keeps income as constant as the weather is variable. It comes down to two smart hedging strategies. Strategy One: Own the skiers. Strategy Two: Own the mountain.

Vail and Whistler hedge against bad snow by turning skiers into members. "Just under 40 percent of our lift tickets come from season passes sold before the ski season begins" ... Vail and Whistler make half their money from lodging, rentals, snow school, and food.

Vail and Whistler are considerably more profitable than large ski resorts in Europe precisely because they've embraced mountain monopolies. In Europe, the mountain is like a strip mall, with restaurants, rental shops, and service centers mostly owned by different companies renting space. At Whistler and Vail, the mountain is more like a cruise or amusement park, where vertical integration means vertical integration. From village to peak, Vail and Whistler own all the key businesses -- equipment rentals, food and beverage, and snow school.

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From a ski-nomics perspective, less competition insulates a stable and growing industry. As skier visits rise annually, Whistler and Vail can afford to raise ticket prices by a tick above inflation knowing that there's no chance of disruptive competition from a new entrant.
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